SUBORDINATED PROMISSORY
NOTE
THIS INSTRUMENT
AND THE RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATE IN
THE MANNER AND TO THE EXTENT SET FORTH IN THAT CERTAIN AMENDED AND
RESTATED SUBORDINATION AGREEMENT (AS AMENDED, RESTATED, MODIFIED OR
REPLACED FROM TIME TO TIME, THE “ SUBORDINATION
AGREEMENT ”) DATED AS OF AUGUST 17, 2009, AMONG THE JOHN
N. KAPOOR TRUST DATED SEPTEMBER 20, 1989, AKORN, INC. (“
AKORN ”), AKORN (NEW JERSEY), INC. (“ AKORN
NEW JERSEY ” AND TOGETHER WITH AKORN, THE “
COMPANIES ”, AND EACH A “ COMPANY
”), AND EJ FUNDS, LP (“ AGENT ”), TO THE
INDEBTEDNESS (INCLUDING INTEREST) OWED BY THE COMPANIES PURSUANT TO
THAT CERTAIN CREDIT AGREEMENT DATED AS OF JANUARY 9, 2009 AMONG THE
COMPANIES, GENERAL ELECTRIC CAPITAL CORPORATION, AS A LENDER AND AS
AGENT FOR THE LENDERS (“ GE CAPITAL ”) AND THE
LENDERS FROM TIME TO TIME PARTY THERETO, AS SUCH CREDIT AGREEMENT
HAS BEEN (I) ASSIGNED BY GE CAPITAL AND THE OTHER LENDERS A
PARTY THERETO TO EJ FUNDS LP, AS AGENT AND LENDER PURSUANT TO AN
ASSIGNMENT AGREEMENT DATED AS OF MARCH 31, 2009, (II) AMENDED
PURSUANT TO A MODIFICATION WARRANT AND INVESTOR RIGHTS AGREEMENT
DATED AS OF THE APRIL 13, 2009 AMONG THE COMPANIES AND EJ FUNDS LP,
AS AGENT AND LENDER, AS FURTHER AMENDED AND RESTATED BY THE
(III) AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF AUGUST
[ • ], 2009 AMONG THE COMPANIES AND EJ FUNDS LP, AS
AGENT AND LENDER, AND (IV) HEREAFTER MAY BE AMENDED, RESTATED,
SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME AND TO
INDEBTEDNESS REFINANCING THE INDEBTEDNESS UNDER THAT AGREEMENT AS
CONTEMPLATED BY THE SUBORDINATION AGREEMENT; AND EACH HOLDER OF
THIS INSTRUMENT, BY ITS ACCEPTANCE HEREOF, IRREVOCABLY AGREES TO BE
BOUND BY THE PROVISIONS OF THE SUBORDINATION AGREEMENT.
THIS
SUBORDINATED PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ ACT”
), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, AND
MAY NOT BE OFFERED, SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED,
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
ACT AND SUCH STATE SECURITIES LAWS, OR AN EXEMPTION FROM
REGISTRATION THEREUNDER.
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US
$5,853,266.68 (includes all accrued interest through the date
hereof) August 17, 2009
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FOR VALUE
RECEIVED, AKORN, INC., a Louisiana corporation (“
Akorn ”) and AKORN (NEW JERSEY), INC., an Illinois
corporation (“ Akorn New Jersey” ) and
collectively with Akorn, the “ Makers” and each
a “ Maker” ), hereby promise jointly and
severally to pay to the order of THE JOHN N. KAPOOR TRUST DATED
SEPTEMBER 20, 1989, or its permitted successors or assigns (“
Payee” ), the aggregate principal sum equal to
$5,853,266.68 (equal to the sum of (i) the stated principal
amount outstanding of the Prior Note (as defined below) of Five
Million Dollars ($5,000,000), (ii) $ 804,892.58 of
outstanding accrued but unpaid interest under the Prior Note as of
its stated date of maturity and (iii) $ 48,374.10 of
additional outstanding accrued but unpaid interest arising from and
after the stated date of maturity of the Prior Note through and
including the date hereof), on the terms and conditions set forth
below, and to pay to Payee interest on the unpaid principal balance
hereof at the rate and on the terms and conditions set forth
herein.
1.
Payment of Principal . The principal amount of this
Subordinated Promissory Note (the “ Note ”),
together with all unpaid interest accrued hereon, shall be due and
payable on the five year anniversary of the date hereof (the
“ Maturity Date” ).
2. Payment of
Interest . The unpaid principal balance due hereunder shall
bear interest at a fixed annual rate (based on a 360-day year) of
fifteen percent (15%) (the “ Interest Rate” )
and such interest shall accrue monthly in arrears (each, whether at
the Interest Rate or Default Interest Rate (as defined below), an
“Interest
Payment” ) on the first day of each month (each, an
“Interest Payment Date” ) commencing on
September 1, 2009; provided that upon the occurrence of a
Default, the outstanding principal balance hereunder shall accrue
at a fixed annual rate (based on a 360-day year) of twenty percent
(20%) (the “ Default Interest Rate” ). All
accrued interest (including any interest at the Default Interest
Rate) shall be paid in kind, and the amount thereof shall be added
to the outstanding principal balance of this Note on such Interest
Payment Date and, thereafter, for all purposes under this Note,
references to the “principal amount” of this Note shall
include the amount of any Interest Payment that has been added to
the outstanding principal balance of this Note.
3.
Subordination . Pursuant to the terms of the Subordination
Agreement, this Note and the indebtedness evidenced hereby shall at
all times be and remain subordinated to any indebtedness owed to
such senior lenders (any such indebtedness being collectively
referred to herein as the “ Senior Indebtedness”
).
4.
Prepayment . Makers may, at their option at any time and
from time to time hereafter, to the extent not p
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